Can Catamaran Earn Investors A Healthy Profit?

Today we're going to look at Catamaran (CTRX), a pharmacy benefits manager. It used to be known as SXC Health Solutions, but was renamed last year after merging with Catalyst Health Solutions.

It was profiled Feb. 19 in a Managing For Success article, which noted that while some companies grow by acquiring their competitors, Catamaran prefers to buy its own customers. And they've bought six companies since 2008.

By acquiring customers already using Catamaran's technology platform, there is a more seamless integration of those firms. So it doesn't face problems like customer retention and adaptation of a new cultural fit for employees in the mergers.

Those acquisitions have helped beef up sales growth, which has been in the triple digits in six of the last eight quarters.

Earnings growth has been more uneven, but came in at 63% last quarter.

And analysts expect earnings to climb 58% this year.

It's scheduled to report first-quarter results May 2 before the open, so watch for those.

Chart Analysis

Catamaran has been forming an early stage, flat base.

To find the ideal buy point in that pattern, just add 10 cents to the highest point in the pattern.

With the market in a correction, it's not a good time to be buying stocks. But this may be one to keep on your watch list so you'll be ready when the next uptrend comes around.

If that happens, you'd like to see Catamaran break out on volume that's at least 40% above average. That heavy volume would be a sign big investors are buying and you can ride their coattails.

Stock Checkup

Catamaran has the second highest Composite Rating in the Medical-Services industry group.

Only Air Methods (AIRM), which provides emergency air transport of intensive care patients, has a higher rating. But Air Method's sales growth and earnings estimate this year aren't as strong as Catamaran's.

Still, the industry group itself is only ranked No. 120 among IBD's 197 groups, so watch to see if that improves.

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03/30/2015 12:15 PM ET

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